Expert Commentary

Measuring Success—Integrated Risk Management

Part 1 of this series examined the risk of injury to an organization's employees, and ways to avoid that outcome. This article outlines some tools and techniques with which to assess the effectiveness of the safety management process.


Construction Safety
June 2006

As discussed in Part 1, the first of the organizational scorecard concepts, the Balanced Scorecard (BSC), was introduced in 1992 by Drs. Robert S. Kaplan and D.P. Norton. This concept then spawned many other scorecards. It is important to understand that each business is unique, and it should decide how many perspectives will provide it with the information to manage effectively. It is not a one-size-fits-all proposition. One may decide on three, four, five, six, or even more perspectives for measurement purposes.

Dr. Kaplan selected four critical perspectives, so as not to overload management with too much information. According to Dr. Kaplan, most organizations rarely suffer from not having enough measures. Quite the contrary, they suffer from information overload. The BSC technique focuses attention on the few critical measures.

To effectively manage, you need to measure. Senior management understands that the measurement system influences organizational behavior. Effective measurement has to be predictive as well as prescriptive in nature if it is to provide information for managing performance. Measurement is difficult because it is not an exact science. There are no hard-and-fast rules of how to go about it. To make things more complicated, it is difficult to foretell the impact on individual behavior, the interactions, and interrelationships between existing diverse variables, and the new ones produced by the new metrics. This is because people are involved, and their actions are inherently unpredictable.

Another thing that contributes to the complexity is that often important factors are hard to measure consistently and objectively. To effectively measure this, variability must be designed out of the system.

The scorecard also serves to bring together into one report several important but seemingly diverse aspects of the business, such as the external as well as the internal focus. Any organizational scorecard will influence the thinking of senior managers and force them to consider all the important operational measures holistically. It also allows them to see if improvement in one area is gained at the expense of another.

"Even the best objectives may be achieved badly," says Dr. Kaplan. Another important aspect of the organizational scorecard is that it creates a platform for alignment within the organization. This is important to strategy deployment, as well as guarding against suboptimization.

Outcome, Process, and Progress Metrics

We must agree that management is about getting things done. Information is required to accomplish this. The traditional financial measures were outcome metrics. These are historical in nature. To manage effectively, management needs information that can predict future outcomes. In other words, metrics that are taken today will predict what the outcome will be in the future. These types of metrics allow for mid-course corrections, and give management the ability to respond quickly and effectively to changes. They also tell them if what they are doing will in fact get them the results they expect at some future date. These are process metrics. Another set of measures that tell managers how well they are doing or how quickly they are improving are progress metrics. To manage effectively all three metrics are required.

In looking at the way safety is traditionally managed, we see that there are many similar issues with our safety metrics. For starters, our primary safety performance metric is of the outcome measure type. Our primary benchmark is the Bureau of Labor Statistics data where we compare ourselves to the national average. And striving to become better than the average is not much of a challenge!

These particular measures and benchmarks do not relate to the metrics that managers of organizations are familiar with, understand, and use to manage the business. This misalignment creates some of the difficultly safety personnel have in getting the attention and the resources they need. Showing success in this arena is problematic at best.

For improvement purposes, traditionally we analyze our losses and plan to change some aspect of the effort going forward. This analysis establishes the improvement strategy and sets the direction for what needs to get done to improve our loss picture and control cost of risk. This method of arriving at a strategy may not necessarily be in alignment with the overall business goals and objectives. This, too, creates some of the difficulty safety faces in the business environment.

Site audits become a source of information on how well the firm is doing to implement the new strategy. This also is not in alignment with what we may need to do, to show managers that we have the "right" strategy to get the results we need or expect. These site audit checklists traditionally focus on the physical environment and governing safety standards. We know from many years of experience that most accidents are the result of "unsafe acts," so this measurement system focuses on items that really do not particularly drive losses.

Align Safety with Business Goals

The biggest disconnect is in the area of alignment with business goals. Here, safety suffers the greatest. One hears safety professionals bemoaning their fate, complaining of not having management support, enough resources, or the full backing of operational folks. They also complain that employees are not made available or having sufficient time to receive training.

Safety personnel also see line management falling short in the implementation and execution of the safety process. Safety metrics do not tell senior managers how the safety effort correlates to their goals and objectives for the business. The organizational scorecard approach, if applied to safety, will provide the alignment, and metrics that will resolve much of the issues and concerns that are seemingly impossible to overcome.

Ideally, the organizations should implement the scorecard technique for both the business as well as safety. In this way, total alignment is possible. If that is not possible, then we can implement a scorecard for safety alone. Though this will not provide the complete alignment possible, it will provide for focused strategy implementation, targeted interventions, as well as progress and process metrics which are nonexistent in the present state.

Applying Scorecards to Safety

So how do we apply the balanced scorecard technique—or for that matter any other scorecard—to safety? If the business has implemented an organizational scorecard process, then it would make sense for the safety perspectives to be aligned with them. Let us assume that the business has adopted the four business perspectives proposed by Dr. Kaplan:

  1. The customer perspective
  2. The internal business perspective
  3. The innovation and learning perspective
  4. The financial perspective

The comparable safety perspectives might be:

  1. The stakeholder in safe work performance—This is everyone, all levels of management as well as the workers.
  2. Safety process and procedure—Everything that is done to make safety "work": programs, training, audits, employee management, risk planning, etc.
  3. Innovation in safety—Technological innovation, skill, and knowledge improvement, alignment, etc.
  4. Safety performance management—Operational excellence, leadership, empowerment, performance standards, performance measurement, etc.

So how do we go about accomplishing this? For example, assume that the vision we have for our safety effort is "an injury-free workplace." The next step is to identify strategies, objectives, measures, and targets for each of the above perspectives. The organizational scorecard places vision and strategy at the center. This process establishes goals that ensure everyone within the organization will adopt behaviors and take the actions that will achieve these goals. The measure is also designed to ensure this occurs and provides an assessment of how everyone is doing in accomplishing the central vision. Senior management now has a process that effectively focuses all the efforts of the organization toward the vision and has the information with which to manage effectively.

A Holistic Approach

Excellence in safety can only be achieved though a strategy-driven, performance-based safety management process. The question is now how can we devise a safety process that will enable us to take advantage of the organizational scorecard to impact safety performance? Obviously, we need to approach the whole thing holistically. Safety should be fully integrated into the organization's operations, and safety outcomes should be aligned with business goals. Therefore, the safety process will become woven into the very fabric of the organization.

The framework for stellar safety performance is made up of three cornerstones:

  • Technical aspects
  • Management techniques
  • Innovative strategies

Figure 1

Stakeholder Focus

Technical Tools

The first element of the technical tools is an effective safety program whereby all the safety standards are adhered to 100 percent of the time. The program should have sound engineering practices, state-of-the-art education, and audits that will be conducted to ensure that policies and procedures are followed.

The second element requires that specialized safety programs be written to address the unique requirements of the business. These might include a substance abuse program, an automobile fleet program, a wellness program, etc.

The third element of this cornerstone is risk assessment and preoperational planning. This is by far the most important element in this cornerstone. The identification of risk and the planning of the operations so as to effectively deal with the risk is a critical activity that all levels of management should engage in.

Management Techniques

There are three elements associated with this cornerstone. The first is resource management. This means the organization must provide the finances and time required to educate and protect its employees.

The second element is performance management. This includes such things as goals and objectives, setting performance measurement standards, establishing accountability, etc.

The third element is measurement. This area deals with how performance is measured and what targets it is to be compared to. There are a number of measures the organization can use. These include input, output, process, progress, and outcome measures. Input, progress, and process measures are predictive and provide information with which to affect change. Outcome and output measures are historical and indicate results.

Innovative Strategies

There are four elements in this cornerstone. The first deals with the organizational systems and business processes and procedures. This element analyzes the systems to identify barriers, pinch-points, and anything that will foster inefficiency or drive unwanted behavior. This element also strives for continuous improvement.

The second element is behavioral interventions. This element looks at the behaviors of individuals and tries to identify the underlying drivers of these. Through system change or consequence management this element tries to change organizational behavior.

The third element is innovation and learning. Change is the only constant in business today. Therefore, for the organizations to thrive, it must become a learning organization. It must identify changes in the environment and react to those changes.

The last element is culture and leadership. Herein lies the very essence of the organization. The values, vision, and strategies devised by the leadership ultimately impact everything the organization does, achieves, and becomes.

In reviewing the 10 elements, one sees that only the technical cornerstone really falls into the safety area. The rest are a part of the way the organization is structured and goes about doing business. The only way to truly manage the risk of incidents, injuries, and losses involving the company's workforce requires an analysis of the means and methods, the planning and systems, as well as the behaviors and leadership within the organization.


References:

Kaplan, R.S. and Norton, D.P., "The Balanced Scorecard—Measures that Drive Performance." Harvard Business Review (Jan.—Feb. 1992): 71-79.

---, "Putting the Balanced Scorecard to Work." Harvard Business Review (Sept.—Oct. 1993): 71-79.

---, "Using the Balanced Scorecard as a Strategic Management System." Harvard Business Review (Jan.—Feb. 1992): 75-85.

---, "The Having Trouble with Your Strategy? Then Map It." Harvard Business Review (Sept.—Oct. 2000): 3-11.


Note: The illustrations, instructions, and principles contained in the material are general in scope and, to the best of our knowledge, current at the time of publication. No attempt has been made to interpret any referenced codes, standards, regulations, principles, or concept. All of this information is public knowledge, and readily available in books and trade journals.


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